Price inflexibility

One of the cliches of libertarianism (or at least that branch of it represented by Freedom News, my former employer) is that there is absolutely no give in product pricing.
If government regulates industries so that they can’t pollute, or have to give workers a living wage, prices will have to go up because otherwise the company will lose money money. If costs go down because of outsourcing jobs overseas to where people work for slave-labor wages, Americans see the benefits because prices go down too!
An extreme form of this argument cropped up some years back when a CNN commentator argued that if we force China to make toys that aren’t hazardous to kids and don’t contain toxic chemicals, prices will rise (apparently poisoned kids is a fair deal in this context). More recently, the New York Times argued that Apple can’t possibly pay its workers a decent wage because that would cost the company profits.
The flaw in this argument is that prices aren’t inflexible. If Apple thought that hiking its costs would hurt sales, it’s perfectly capable of eating the loss to sustain market share. And I’m pretty sure that sneaker companies paying overseas workers one tenth or less of what Americans make aren’t slashing the price accordingly.
Then there’s the unethical overtones: Is having lower prices more important than treating workers fairly or protecting the environment (even if the workers and the environment aren’t American)?
And it’s debatable whether it’s even a good deal for Americans. The standard Freedom editorial was that everyone benefits form free trade and deregulation because it keeps prices low. Business Week, however, reported a few years back that even economists who were bullish on outsourcing conceded that if all the financial gains flowed to corporations and stockholders, it’s a net loss for Americans.
A more recent online article (I can’t find my link to it) argued persuasively that having money flow to the 1 percent at the cost of American jobs is a loser: The 1 percent can only buy so much, so without lots of gainfully employed people making decent wages, we’re going nowhere.
So here’s a thought for Newt Gingrich: Instead of a campaign to allow everyone on Earth the right to own guns, how about a campaign to allow everyone the right to unionize and giving everyone decent working conditions?
Given the Repub attack on unions even in this country, I’m not holding my breath.

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Filed under economics, Politics

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